Agilent - JP Morgan Healthcare Conference 2010.ppt...Agilent Technologies JP Morgan 28JP Morgan 28th...

Agilent TechnologiesJP Morgan 28th Annual Healthcare ConferenceJP Morgan 28 Annual Healthcare Conference

Monday, January 11, 2010SWestin St. Francis Hotel

San Francisco, CA


Adrian T. DillonExecutive Vice President, Finance and AdministrationFinance and AdministrationChief Financial Officer

This presentation contains forward-looking statements (including without limitation statements regarding the

Safe Harbor StatementThis presentation contains forward looking statements (including, without limitation, statements regarding the enhancement of shareholder value, restructuring activities, the acquisition of Varian, Inc., and information and future guidance on our goals, priorities, orders, revenues, demand, growth opportunities, customer service and innovation plans, new product introductions, financial condition, earnings, liquidity, capital structure, operating performance, cost structure, cyclicality, the continued strengths and expected growth of the markets we sell into operations operating earnings balance sheet models and our cash flowthe markets we sell into, operations, operating earnings, balance sheet models and our cash flow expectations) that involve risks and uncertainties that could cause results of Agilent to differ materially from management’s current expectations.

In addition, other risks that the company faces in running its operations include the ability to execute successfully through business cycles while it continues to implement cost reductions; the ability to meet andsuccessfully through business cycles while it continues to implement cost reductions; the ability to meet and achieve the benefits of its cost-reduction goals and otherwise successfully adapt its cost structures to continuing changes in business conditions; ongoing competitive, pricing and gross margin pressures; the risk that our cost-cutting initiatives will impair our ability to develop products and remain competitive and to operate effectively; the impact of geopolitical uncertainties on our markets and our ability to conduct b i th bilit t i t f t d t t h i d d th bilit t f llbusiness; the ability to improve asset performance to adapt to changes in demand; the ability to successfully introduce new products at the right time, price and mix, and other risks detailed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended October 31, 2009.

The company assumes no obligation to update the information in these presentations. These presentations and the Q&A that follows include non-GAAP numbers. A presentation of the most directly comparable GAAP numbers and the reconciliations between the non-GAAP and GAAP numbers can be found at http://www.investor.agilent.com under “Financial Results” and accompany this slide set.

Page 3

Highlights for 2009Agilent Operating Model drives impressive results in tough economy

Financial•Remained profitable through the worst economic downturn in company’s history•Remained profitable through the worst economic downturn in company s history

•Generated $280M of operating FCF and 11% ROIC--despite 22% revenue drop

•Proforma EPS* of $0.80 surpassed both internal and external expectations

Operational •Acted quickly and decisively to prepare for downturn (sharp contrast to 2001 crash)

•Restructured businesses to deliver $525 million in structural cost savings per year

Commercial•$600M+ R&D investment : committed to maintaining market leadership

•Market wins: emerging markets (China); food safety test•Market wins: emerging markets (China); food safety test

•Product wins: microarrays; LTE/WiMax solutions; GC QQQ; 1290 LC

*presented on a non-GAAP basis, a reconciliation to the closest GAAP equivalents has been provided

Company Overview

Primary Businesses

FY09 Revenue: $2.4B FY09 Revenue: $0.9B FY09 Revenue: $1.2B

LTM Revenue*$1.1B

LTM Revenue*$1.0B

LTM Revenue*$2.7B

Electronic Measurement Group

Chemical Analysis Group

Life SciencesGroup

above reflects segmentation in effect Q1 2010

2009 Reported Segmentation

Electronic MeasurementFY09 Revenue: $2.2B

Bio-Analytical MeasurementFY09 Revenue: $2.1B

Semi & Board Test: $0.2B

p g

combined under electronic measurement FY10 reported separately as life sciences and chemical analysis in FY10

Page 5

Major Market Drivers and Opportunities Created

Agilent OpportunityMarket Drivers

CommunicationsPeople want to communicate more information from anywhere!

Agilent Opportunity

Lead in development of new 4G wireless testing solutions

ElectronicM

Market Drivers

Homeland SecurityThreat of terrorism is real and not going away!

Applying world-class measurement technology to operational

surveillance

Measurement

Human Health and Aging PopulationsPeople are looking for faster, more affordable, and targeted disease & drug discoveries.

Leverage our broad portfolio of proven technologies to provide

application solutions throughout the Life Sciences research and drug

LifeSciences

Rising Standards of Living Applying market leading technology, application solutions and global

gdiscovery process

Ch i l People are demanding the food they eat, products they use, water they drink, and air they breathe is safe.

application solutions, and global expertise to the world’s food safety,

environmental, forensic and petrochemical test challenges

ChemicalAnalysis

Page 6

Agilent FY09 Revenue Distribution Diversified portfolio reduces overall volatility

BY KEY END MARKETS BY GEOGRAPHY

AsiaEurope Asia Pacific

36%

Europe26%

Americas38%

Cash UpdateIn control of our economic destiny

• Ended Q409 with $1,215M net cash & short term investments

• Generated $213M in operating cash flow in 4th quarter

$1 5B V i i iti * ill t d bt t l iti• $1.5B Varian acquisition* will move us to a debt neutral position

• Re-starting the share repurchase program sufficient to maintain

the share count at 350M

*subject to regulatory approval and other closing conditions

Agilent’s Commitment Deliver performance consistent with Agilent’s Operating Model

• Agilent Operating Model

• 20% ROIC on average across the cycle

• 30-40% operating profit incremental/decremental

• Operating cash flow positive at every point in the cycle

• Management incentives aligned with operating modelg g p g

• Take additional action – where automatic flexibility not

enoughenough

Page 9


Nicolas (Nick) Roelofs, Ph.D.( ) ,President - Life Sciences Group

Life Sciences Overview

Pharma/Biotech(For Profit)

Life Sciences Market: $18B

Market DriversMarket Drivers• Academic and government investment• Fundamentally linked to human health • Life Science applications – “omics”

Academic and Government

16% of Agilent Revenue• Growth in generics and CROs• Therapeutic conversion from New Chemical Entities to New Biological Entities

Academic and Government(Not-For-Profit) Focus for FY10

• Accelerate academic/government market penetration

6% of total Agilent Revenue

• Emphasizing focus on technology adoption• Emerging economies• Capture opportunities in global stimulus

packages targeted at Life Science

packages targeted at Life Science

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Chemical Analysis Overview

Chemical Analysis Market: $9BPetrochemical& Chemical 8% of Agilent

Market Drivers• Food Safety • Lab Productivity

Gl b l t ti l ff t

& Chemical Testing

revenue

Environmental 7% of Agilent• Global government stimulus efforts• China

Focus for FY10

Testing

$0 3 B 7% f A il t

revenue

• Lead in the Food Testing market • Integrate Varian*• Portfolio expansion – instruments, Xconsumables and services

$0.3 B34% of total revenue

Food Testing 7% of Agilentrevenue

Xconsumables and services• Improve customer experience

* Transaction not yet closed; subject to regulatory approval and other closing conditions

ForensicsTesting

2% of Agilentrevenue

and other closing conditions

Page 12

1290 Infinity UHPLC System

Life SciencesProducts and solutions released in FY091290 Infinity UHPLC System

Offering the industry largest power range (1200bar, 5ml/min) for highest speed and resolution and 2-80x increased sensitivity. Also comes as method development solution with industry highest versatility and HT System processing more than 2000 samples/day.y y p g p y

6400 Series Triple Quadrupole, 6500 Series Q-TOF & 6200 Series TOF

Speed, sensitivity, software, and solutions. Fast pos/neg switching and unique Dynamic MRM to meet the demands of UHPLC separationsunique Dynamic MRM to meet the demands of UHPLC separations. AMRT databases and libraries for fast screening and ID.

SureSelect™ Target Enrichment SystemThe first fully customizable liquid genome partitioning / enrichment reagent SureSelect™The first fully customizable liquid genome partitioning / enrichment reagent system. This system enhances and accelerates nucleic acid sequencing experiment when used in front of “next generation” sequencing technologies. By partitioning the input sample the complexity of the sequencing experiment is reduced in sequencing time , data output and sequencing cost.

SureSelectTarget Enrichment System

SurePrint G3 CGH and CNV Microarrays (1M feature)Expanded CGH and CNV platforms with empirically validated probes, high-throughput assay protocols, robust analysis tools, and fl ibl lti k f t f b th t l d t

Page 13Page 13

flexible multi-pack formats for both catalog and custom arrays.

Chemical AnalysisProducts and solutions released in FY09

Agilent 7693 AutosamplerEnhanced Agilent 7890 GC System Capabilities• 7693 Autosampler, Bloss bead, LTM “fast GC”,

Capillary Flow Multi-Mode TechnologiesCapillary Flow, Multi Mode Technologies

7000A Triple Quadrupole GC/MS• Unmatched sensitivity and selectivity for complex

samples with Agilent’s traditional reliability

Agilent 7890A GC

LTM (low thermal

samples with Agilent s traditional reliability

7700A ICP-MS• Continuing innovation: improved interference

removal sensitivity ease of use/maintenance 30% LTM (low thermal mass) Option

removal, sensitivity, ease of use/maintenance, 30% smaller footprint, Mass Hunter data analysis.

C S

Agilent 7000A GC-Triple QuadAgilent 7700 ICP-MS

Columns and SuppliesProducts and solutions released in FY09

Sample Preparation – Expansion of SampliQ SPE & QuEChERS Kits

• New SPE sample prep solutions available in a wide variety of• New SPE sample prep solutions available in a wide variety of formats for enhanced productivity

• Rapid, worldwide adoption of these kits for pesticide analysis in fruits and vegetables

SPE

GC Columns – Expansion of Ultra Inert• Unmatched Inertness & ultra low column bleed for the most

demanding applications

LC Columns Zorbax Rapid Resolution High Definition

QuEChERS

GENERAL PURPOSE

LC Columns – Zorbax Rapid Resolution High Definition (RRHD) 1.8µm, high pressure (1200 bar)

• Designed for use with the new Agilent 1290 Infinity LC or other UHPLC systems

1290 Infinity LCRRHD Columns

FY10 - Positioned for Growth; Operating Discipline Remains

• Agilent Operating Model – rapid response to

economic headwinds

• Bio-Analytical Measurement – positioned for growth

• Electronic Measurement Group – focus on R&D,

restructure to achieve 12% operating margin at $2.4B

in revenue (30% below FY08)

• Varian Acquisition* – execute on integration plan• Varian Acquisition – execute on integration plan

post-close; realize sources of value*not yet closed subject to regulatory approval and other closing conditions

Page 16

not yet closed, subject to regulatory approval and other closing conditions


Monday, January 11, 2010SWestin St. Francis Hotel

San Francisco, CA

AGILENT TECHNOLOGIES, INC.RECONCILIATION OF OPERATING FREE CASH FLOW(IN MILLIONS)PRELIMINARY

FY09 FY08 FY07Net cash provided by operating activities 408 756 969Less: Investments in property, plant and equipment 128 154 154Operating free cash flow 280$ 602$ 815$

The preliminary reconciliation of operating free cash flow is estimated based on our current information.

Operating free cash flow is a non-GAAP measure which management believes provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for strategic opportunities including investing in the Company's business and making strategic acquisitions. Our management uses this measure which is a common one in our industry to compare ourselves to our competitors and to measure our own performance. A limitation of operating free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Our management compensates for this limitation by monitoring and providing the reader with a complete GAAP statement of cash flows which includes net cash provided by operating activities.

Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.

AGILENT TECHNOLOGIES, INC.NET CASH DETAILS(IN MILLIONS)PRELIMINARY

Q4'09 Q4'08 Q3'09 Delta % Delta %

Cash and cash equivalents $ 2,479 $ 1,405 $ 1,479 Restricted cash and cash equivalents 1,566 1,582 1,568 Investments - debt securities 36 96 49 Long-term debt (1,516) (1,514) (1,515)Senior notes (1,350) (600) (600)

Total Net Cash $ 1,215 $ 969 $ 981 $ 246 25.4% $ 234 23.9%

The preliminary reconciliation of net cash is estimated based on our current information.

Year over Year Sequential

AGILENT TECHNOLOGIES, INC.RECONCILIATION OF ROIC(IN MILLIONS)PRELIMINARY

Numerator: FY09 FY08 FY07Adjusted income from operations 393$ 888$ 719$ Less: Taxes and Other (income)/expense 67 161 163

Agilent return (a) 326$ 727$ 556$

Denominator:Agilent assets (b) 2,405$ 2,746$ 3,591$ Less: Net current liabilities (c) 641 717 756 Invested capital 1,764$ 2,029$ 2,835$

Average invested capital 2,838$ 2,886$ 2,729$

ROIC 11% 25% 20%

ROIC calculation:(current fiscal year Agilent return)/(average of the five most recent quarter-end balances of Agilent Invested Capital)

(a) Agilent return is equal to adjusted net income from continuing operations minus net interest income after tax. Please see "Adjusted Net Income and EPS Reconciliations" for a reconciliation of adjusted net income from continuing operations to GAAP income from continuing operations.

(b) Assets consist of inventory, accounts receivable, property plant and equipment, gross goodwill and other intangibles, deferred taxes and allocated corporate assets.

(c) Includes accounts payable, employee compensation and benefits, deferred revenue, other accrued liabilities and allocated corporate liabilities.

Historical amounts were reclassified to conform with current period presentation.

The preliminary reconciliation of ROIC is estimated based on our current information.

Agilent

Return on invested capital (ROIC) is a non-GAAP measure that management believes provides useful supplemental information for management and the investor. ROIC is a tool by which we track how much value we are creating for our shareholders. Management uses ROIC as a performance measure for our businesses, and our senior managers' compensation is linked to ROIC improvements as well as other performance criteria. We believe that ROIC provides our management with a means to analyze and improve their business, measuring segment profitability in relation to net asset investments. We acknowledge that ROIC may not be calculated the same way by every company. We compensate for this limitation by monitoring and providing to the reader a full GAAP income statement and balance sheet.

Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.

AGILENT TECHNOLOGIES, INCRECONCILIATION FROM GAAP TO NON-GAAP

TWELVE MONTHS ENDED OCTOBER 31, 2009(Unaudited)

Acceleration of Share-Based

Restructuring Compensation Patentand Other Asset Business Expense Related to Intangible Pension Litigation Litigation Adjustment for

(In millions, except per share amounts) GAAP Related Costs Impairments Disposals Worforce Reduction Amortization Curtailment Judgement Settlement Other Taxes Non-GAAP

Orders Change Year Over Year -22% 4,486$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 4,486$ -22% Change Year Over Year

Net revenue Change Year Over Year -22% 4,481$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 4,481$ -22% Change Year Over Year

Costs and expenses: Cost of products and services Gross Margin 51.1% 2,189 (74) (11) - - (37) 4 - - (3) - 2,068 53.8% Gross Margin Research and development As a % of Revenue 14.3% 642 (36) (4) - - - 4 - - (1) - 605 13.5% As a % of Revenue Selling, general and administrative As a % of Revenue 35.8% 1,603 (137) (29) - (5) (8) 8 - (17) - 1,415 31.6% As a % of Revenue Total costs and expenses 4,434 (247) (44) - (5) (45) 16 - - (21) - 4,088

Income from operations Operating Margin 1.0% 47 247 44 - 5 45 (16) - - 21 - 393 8.8% Operating Margin

Other income (expense), net (40) - - (8) - - (6) 13 2 - (39)

Income before taxes 7 247 44 (8) 5 45 (16) (6) 13 23 - 354

Provision for taxesTax rate (incl. Valuation

Allowance) 543% 38 - - - - - - - - - 36 74 21%Tax rate (incl. Valuation Allowance)

Net income (loss) Net Margin -0.7% (31)$ 247$ 44$ (8)$ 5$ 45$ (16)$ (6)$ 13$ 23$ (36)$ 280$ 6.2% Net Margin

Net income (loss) per share - Basic and Diluted:

Basic (0.09)$ 0.71$ 0.13$ (0.02)$ 0.01$ 0.13$ (0.05)$ (0.02)$ 0.04$ 0.07$ (0.10)$ 0.81$ Diluted (0.09)$ 0.71$ 0.13$ (0.02)$ 0.01$ 0.13$ (0.05)$ (0.02)$ 0.04$ 0.07$ (0.11)$ 0.80$

Weighted average shares used in computing net income (loss) per share:

Basic 346 346 346 346 346 346 346 346 346 346 346 346 Diluted 346 348 348 348 348 348 348 348 348 348 348 348

The preliminary reconciliation from GAAP to Non-GAAP net income is estimated based on our current information.

Non-GAAP Adjustments

AGILENT TECHNOLOGIES, INCRECONCILIATION FROM GAAP TO NON-GAAP (INCLUDES FAS 123R IN GAAP & NON-GAAP)

TWELVE MONTHS ENDED October 31, 2008(Unaudited)

BusinessRestructuring Disposal and Excess Net translation Acceleration of

and Asset Infrastructure Software Intangible gain from liquidation Debt Issuance In Process Adjustment for(In millions, except per share amounts) GAAP Impairment Reduction Costs Amortization Amortization of a subsidiary Costs R & D Other Taxes Non-GAAP

Orders Change Year Over Year 6% 5,750$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 5,750$ 6% Change Year Over Year

Net revenue Change Year Over Year 7% 5,774$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 5,774$ 7% Change Year Over Year

Costs and expenses: Cost of products and services Gross Margin 55.4% 2,578 (15) - - (36) - - - - - 2,527 56.2% Gross Margin Research and development As a % of Revenue 12.2% 704 (5) - - - - - (2) - - 697 12.1% As a % of Revenue Selling, general and administrative As a % of Revenue 29.4% 1,697 (8) (2) (3) (17) - - - (5) - 1,662 28.8% As a % of Revenue Total costs and expenses 4,979 (28) (2) (3) (53) - - (2) (5) - 4,886

Income from operations Operating Margin 13.8% 795 28 2 3 53 - - 2 5 - 888 15.4% Operating Margin

Other income (expense), net 20 - (2) - - (11) 13 - 3 - 23

Income from operations before taxes 815 28 - 3 53 (11) 13 2 8 - 911

Provision for taxesTax rate (incl. Valuation

Allowance) 15% 122 - - - - - - - - 60 182 20%Tax rate (incl. Valuation Allowance)

Net income (loss) Net Margin 12.0% 693$ 28$ -$ 3$ 53$ (11)$ 13$ 2$ 8$ (60)$ 729$ 12.6% Net Margin

Net income (loss) per share - Basic and Diluted:

Basic 1.91$ 0.08$ -$ 0.01$ 0.15$ (0.03)$ 0.04$ 0.01$ 0.02$ (0.18)$ 2.01$ Diluted 1.87$ 0.08$ -$ 0.01$ 0.14$ (0.03)$ 0.04$ 0.01$ 0.02$ (0.18)$ 1.96$

Weighted average shares used in computing net income (loss) per share:

Basic 363 363 363 363 363 363 363 363 363 363 363 Diluted 371 371 371 371 371 371 371 371 371 371 371

The preliminary reconciliation from GAAP to Non-GAAP net income is estimated based on our current information.

Non-GAAP Adjustments

Agilent - JP Morgan Healthcare Conference 2010.ppt...Agilent Technologies JP Morgan 28JP Morgan 28th...

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